Retail rush at the malls: Sales zoom about 40% y-o-y

NEW DELHI/MUMBAI: On Sunday there was a long queue of cars waiting on the driveway of the Phoenix Mills mall in Mumbai's Lower Parel where there was no space left for parking as shoppers thronged the mall to splurge on end-of-season sales that started in the weekend.

Sales in the first three days rose 20-40% from last year's discount season for most brands as deep discounts and pent-up demand brought consumers out in full force, while top retailers such as Zara, Pantaloon and Westside clocked anywhere between 60% and 200% jump in sales.

"This is unprecedented...I have never seen anything like this during any sale season," says Rajendra Kelkar, senior centre director for west at High Street Phoenix that operates three malls in Mumbai and Pune.

He says two lakh people descended on the firm's Pune mall on Sunday, double that of usual holidays and weekends. "This is happening in a city like Pune that has 60 lakh population and 40% of that is below poverty line," he adds. Kelkar says sales rose 40-50% year-onyear in all its three malls.

Coming at a time when the country is battling economic woes on many fronts including rising inflation and a sharply sliding rupee, the sudden surge in demand has come as a surprise.

"Such a response is really surprising as the markdown or discounts offered by retailers were lower than last year," says Nirzar Jain, vice-president at Mumbai-based Oberoi Mall that reported an average sales growth of 40%. "While the footfalls were not substantially higher than last year, the conversion rate or actual people buying were higher this time," he said. Retailers attribute the surge in demand to a trend among consumers to hold back their purchases for the sale season that they see as bargain shopping."Consumers are doing planned purchases very well these days," says Pushpa Bector, head of leasing at DLF Utilities that operates malls in Delhi's Saket and Vasant Kunj neighbourhoods. "For example, if anyone has to buy three pairs of jeans a year, he or she finds it worthwhile to wait to shop for that during discount seasons," she says.

At Select Citywalk mall in south Delhi, brands that have gone on sale including Zara, French Connection, Mango, Pantaloons, Calvin Klein and Swaroski have mopped up four times revenues on their first day of sale compared to their daily averages.

Tommy Hilfiger outlet in the mall clocked sales of Rs20 lakh on the first day, a one-day record sale for any of its store in the country, a person with direct knowledge of the matter said. The Zara outlet in the mall saw maddening crowd and sales zoomed to Rs96 lakh on the very first day of the discount sale. Across the town, at Pacific Mall in west Delhi, Zara clocked Rs65-lakh sales on Day 1, 15% more than the first day sale of last year. In the first three days, the anchor tenant has accumulated Rs2.18 crore, 20% more than last year. Ditto is the case at Mumbai's Infiniti Mall where Zara made Rs1.7 crore in the first three days, while Mango, Westside and Pantaloon had sales ranging from Rs6.5 lakh to Rs20 lakh per day, according to industry insiders.

"There was a tendency to wait before the sale period which led to a lot of pentup demand from consumers," says Mukesh Kumar, vice-president at Infiniti Mall, which recoded its highest-ever footfall of 77,000 on Sunday. "On an average, sales for most brands went up by 60% compared to January end-of-season sale. We are also seeing over 90% of brands participating in the sale compared to 70% earlier," he said. Arvind Brands, which operates brands such as Flying Machine, Arrow, U.S. Polo Association, Wrangler and Lee, has posted about 25% year-onyear rise in sales in the first few days, its chief executive J Suresh says. The sales boom, although at the cost of margins, belie experts who had predicted a slower growth this year.

Research agency India Ratings had a negative outlook on the retail sector for 2013 due to protracted weakness in consumer's discretionary spending, marginal real wage growth and low level of macroeconomic activity. While the retail sector experienced overall single-digit revenue growth in 2012 the first time in its history, the agency had estimated a growth of 3-8% in 2013. Experts, meanwhile, say retailers may face some inventory management issue because the end-of-season sale was planned for longer-thanusual 45 days.

"Going by the initial response, most of the stocks will be cleared much before the season ends and if the retailer doesn't plan merchandise accordingly, he can be in a dilemma to either discount fresh stocks or disappoint consumers," head of an international brand says.